U.S. Credit Downgrade Raises Recession Fears
The United States has lost its AAA credit rating for the first time in history, putting a big dent into President Barack Obama’s economic plans and raising speculations of another recession.
Standard & Poor’s downgraded the U.S.’s credit rating earlier this week from AAA to AA+, in a move that economic experts say could be an ominous sign of another recession for the world’s largest economy. The downgrade comes amid the continued downturn of almost all economic indicators in the U.S., with the exception of jobs, which added a higher-than-expected 117,000 in July.
However, despite the historic downgrade, experts say interest rates in the U.S. will most likely not go up, unlike when the credit demotion occurred in other countries. This is largely because the U.S. remains very capable of paying off its $9.8-trillion debt. In addition, U.S. treasury bills, notes, and bonds remain attractive to investors. “Anytime there’s a problem anywhere on the planet, investors come to the safety of the U.S., and they don’t go anywhere else,” Mark Zandi of Moody’s Analytics said.